How to protect your home when borrowing for business: seven levers before you sign

Almost nobody sets out to risk the family home on a business loan. It happens in small steps. A lender asks for a guarantee, the paperwork says “all monies”, the settlement date is close, and signing seems like the price of getting on with it.

The good news is that the exposure is far more adjustable than it looks at the signing table. Some of the levers sit in the loan documents, some in how you structure the business, and some in the rules banks are required to follow. This guide goes through them in the order you’d use them.

How does my home actually get exposed?

There are two doors, and people often only notice one.

Door one: the home is the security. You or a co-owner sign a mortgage over the property. If the loan defaults, the lender can enforce against it, through the process set by state law.

Door two: you’ve given a personal guarantee. Even with no mortgage over your home, a guarantee makes you personally liable for the company’s debt. The lender can pursue your assets, including your equity in your home, through the courts, which usually takes longer but ends in the same place.

A company structure doesn’t protect you from either. It protects you from company debts you haven’t guaranteed. The guide on business loans and personal guarantees explains the mechanics, and the glossary entry on a personal guarantee has the short version.

Lever 1: Could another asset be the security?

Before the house goes on the table, ask what else could. Depending on the loan, options include:

• The asset being bought (equipment, a vehicle, the commercial property itself).
• Receivables or stock under a general security arrangement.
• Other business property.
• A smaller amount of security supported by a lower loan amount.

Each choice has trade-offs. A lender may value commercial property more conservatively than residential, for instance. Our comparison of home equity versus commercial property as security lays them out. If the bank is asking for more than you have, bank wants more security than you have covers your options.

Lever 2: Can I cap or narrow the guarantee?

This is usually the most valuable single request. Under the 2025 Banking Code of Practice, a guarantee is to be limited to a specific amount or category of liability, or to the value of specified security. You can also write to the bank asking to limit your liability further, although the bank isn’t required to agree if the limit wouldn’t cover the borrower’s existing liability.

Practical asks:

• A dollar cap, ideally near the loan amount rather than “all monies”.
• This facility only, so the guarantee doesn’t stretch to future borrowing.
• Fewer guarantors, or proportional guarantees where there are several.
• A release trigger, such as 24 months of on-time repayments.

Put it in writing and get the final version of the document, not a summary. The negotiation side is covered in business loan terms you should negotiate.

Lever 3: What protections apply if the lender is a bank?

Banks that subscribe to the Banking Code of Practice must follow specific steps before accepting a guarantee. Reading the Code, the main points are:

Step	What the Code says
Notice	The guarantee must include a prominent notice that you can refuse to sign
Advice	You should consider seeking independent legal and financial advice
Meeting	The bank must arrange a meeting with you, without the borrower present, unless you’ve confirmed independent legal advice (and certain other exceptions apply, such as director guarantors)
Waiting period	The bank cannot accept the guarantee until the third day after you receive the required information, unless the same advice confirmation applies
Enforcement order	The bank generally must first enforce security provided by the borrower, before calling on a guarantor
Residence	If action involves your principal residence, the bank is to encourage you to tell it about your circumstances

That enforcement order is quietly important: if the business has assets that the lender holds security over, those are meant to come first. Note that the Code binds subscribing banks only. Non-bank lenders aren’t covered by it, so ask what protections apply and get answers in writing.

Lever 4: Should I take independent legal advice?

Yes, and not only for the technical reason that it speeds things up. A solicitor who acts for you alone will read the guarantee and security documents, explain the worst case in plain language and tell you what’s negotiable. If you’re signing alongside a spouse or business partner, each of you should have separate advice, because your interests are not identical.

It costs a few hundred dollars, perhaps more for complex security. Set that against what’s at stake and it’s a cheap decision. If you aren’t sure where to start, the free Small Business Debt Helpline (1800 413 828) can talk through debts and personal guarantees and their implications, though it does not replace a lawyer.

Lever 5: Is the loan the right size and shape?

The strongest protection is borrowing less, or borrowing differently. Test it:

• Stress the repayments. Could the business meet them in its weakest month? Use the business loan repayment calculator and the debt service coverage calculator.
• Match the term to the purpose. Short-term money for a long-term project creates refinance risk at the worst moment.
• Check the exit. If the plan relies on a sale, a refinance or a big invoice, what happens if it’s three months late? See what makes a good exit strategy.
• Compare unsecured options. They cost more or allow less, but if the amount is modest they keep your home out of it. Secured versus unsecured business loans has the trade-offs.

Lever 6: Does structure help?

A little, but not magic. Running the business through a company or trust separates business debts from your personal ones, up to the point where you guarantee them. A few sensible habits help:

• Keep personal and business finances separate in the bank accounts.
• Know who owns the home and in what names. Ownership structure affects who is exposed.
• Don’t give guarantees you can avoid, and keep a register of those you’ve given.
• Get advice from your accountant and lawyer before restructuring ownership. Moving assets around when debt is looming can attract legal challenge, and it’s not a tactic for people who are already in trouble.

Lever 7: What if I’m already signed?

Existing guarantees aren’t always set in stone. Ask the lender about releasing or limiting a guarantee when you refinance, when the balance has dropped, or when other security is added. If the lender is a bank and you’re unhappy with how a guarantee process was handled, AFCA’s small business service may be able to look at it, and the AFCA small business page explains what it covers.

A worked example

An illustration, not a real client. A couple who run a physiotherapy clinic through a company want $450k to buy the premises. The bank’s first offer: first mortgage over the clinic, plus an unlimited guarantee from each of them, plus a mortgage over their home.

They take three steps. Each has separate legal advice. They ask for the clinic alone as security, since the loan-to-value ratio is comfortable. And they ask for guarantees capped at $450k each and limited to this loan. The bank agrees to drop the home mortgage and caps the guarantees, but keeps them.

The result: the home is no longer security, and the guarantee is limited. The risk hasn’t vanished, but it’s bounded and understood, which is the realistic goal.

When it makes sense to look wider

Sometimes a lender simply wants more than you’re willing to give. A bank’s answer is a reasonable one when you don’t fit its criteria, and a bank offer that fits is often the cheapest money. If it says no, or asks for security you don’t want to offer, that’s the time to compare other structures.

Our enquiry form takes about a minute, and enquiring involves no credit check, so there’s no footprint on your file. We don’t forward your details to a long list of lenders, and a real person reads your situation and calls. Please be accurate about the property, what’s already secured and what you’re willing to offer, so the first option isn’t one that asks for your home when you’ve said no.

See options that keep your home out of it →